There’s a growing player in the burgeoning direct homebuying segment that now boasts the backing of one of Silicon Valley’s top venture capital firms.
Seattle-based FlyHomes recently announced that it raised $17 million in its Series A funding round, which was led by Andreessen Horowitz, which previously invested in Facebook, Airbnb, Foursquare, Skype, Twitter, and others.
This is hardly Andreessen Horowitz’s first venture into the real estate space either. Back in 2016, the firm led a $15 million Series A funding round for PeerStreet, an online marketplace for real estate-backed loans.
The firm also backed Point, a financial technology platform that offers homeowners the opportunity take equity out of their home without taking on new debt.
And now, Andreessen Horowitz is powering FlyHomes as well.
The funding round also included participation by Mark Vadon, a Seattle entrepreneur behind Blue Nile and zulily who previously participated in FlyHomes’ seed round in 2017. Also taking part in the Series A funding were Shasta Ventures and others.
According to the company, it plans to use the new funding to grow its “Cash Offers” program, increase its staff, invest in product development, and expand into new markets.
FlyHomes currently operates in the Seattle, Seattle, Chicago, San Francisco Bay Area, and Boston areas.
Its “Cash Offers” program is currently only available in Seattle. According to the company, “Cash Offers” can help “level the playing field” for prospective homebuyers in markets where all-cash offers are king, like Seattle.
In the “Cash Offers” program, FlyHomes actually buys a home on behalf of the pre-qualified homebuyer using the company’s own money. If the seller accepts the offer, FlyHomes closes in a matter of days and gives the seller up to 60 days to move out.
The company then transfers ownership of the house to the homebuyer once their financing has closed, typically around 30 days later.
But how does FlyHomes make money? Well, the buyer pays for FlyHomes’ cost of owning the home, but according to the company, that amount is often less than the standard commission rebate that FlyHomes provides to its buyers at closing. The company claims that this process makes submitting a FlyHomes Cash Offer “effectively free” for the buyer.
FlyHomes also takes a standard buyer’s agent commission from the seller.
According to the company, its program allows buyers to present “all-cash, fast close offers” to sellers in markets where cash offers usually win.
The company claims that its program has been “enormously successful,” with its clients winning more than one out of every two offers submitted.
Overall, the company has helped more than 400 people close on more than $300 million worth of homes since 2015.
“In today’s market, sellers are regularly taking less than the highest offer because an investor has cash, which gives them a competitive advantage over traditional home buyers,” Stephen Lane, CEO and co-founder of FlyHomes, said.
“We give any buyer that is able and willing to purchase a home an equal footing – our cash, which helps our clients win, but also helps sellers because they don’t have to sell their home at a discount to an investor in exchange for certainty,” Lane added.
In addition to expanding its Cash Offers program, the company is also plotting an expansion into mortgages.
Previously, the company worked with buyers who were pre-qualified and had mortgage financing through a lender, but beginning this summer, the company plans to begin qualifying customers in-house through a wholly-owned subsidiary, FlyHomes Mortgage.
According to the company, FlyHomes Mortgage will not be funding the mortgages itself. Rather, FlyHomes Mortgage will act as a mortgage broker on behalf of other lenders.
“We are always on the lookout for businesses that are on a mission to provide consumers a better level of service for a lower cost than traditional models,” of Andreessen Horowitz’s Alex Rampell said.
“The real estate industry is at a critical inflection point and we see the vertical approach that FlyHomes is pioneering as a dramatic improvement to the home purchase experience for home buyers, sellers, and agents,” Rampell added. “We’re excited to partner with them to expand upon their vision.”
Tushar Garg, FlyHomes’ chief operation officer and co-founder, said that the company views its business model as beneficial for all parties involved.
“We believe in the long-term that buyers, sellers, and listing agents will all win if we're successful at turning every home buyer into a cash buyer in seller’s markets,” Garg said. “Our focus is on today though, and our mission is simple: we want to give every one of our client's the best possible shot at winning their dream home.”